Lisbon v. Heatcraft, Inc.

930 P.2d 1096, 23 Kan. App. 2d 374, 1997 Kan. App. LEXIS 14
CourtCourt of Appeals of Kansas
DecidedJanuary 17, 1997
DocketNo. 74,737
StatusPublished
Cited by1 cases

This text of 930 P.2d 1096 (Lisbon v. Heatcraft, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lisbon v. Heatcraft, Inc., 930 P.2d 1096, 23 Kan. App. 2d 374, 1997 Kan. App. LEXIS 14 (kanctapp 1997).

Opinion

Prager, C.J.:

This is an action to recover damages for breach of contract brought by Bob Lisbon, d/b/a Lisbon Associates (Lisbon), against Heatcraft, Inc., d/b/a Advanced Distributor Products (Heatcraft). Heatcraft appeals from the damage award entered in favor of Lisbon after a jury trial. Heatcraft contends the trial court erred by allowing the jury’s damage award to include both Lisbon’s lost profits and his expenses. Lisbon cross-appeals from the trial [375]*375court’s decision to deny it prejudgment interest on the damage award.

The essential facts in the case are not greatly in dispute and are as follows: Lisbon is a sales organization which represented manufacturers that do not have their own sales force. Pursuant to agreements with 20 different manufacturers, Lisbon sold parts and components for use in heating, refrigeration, and air conditioning. On February 1, 1992, Lisbon contracted to become Heatcraft’s exclusive sales representative for a five-state area.

The contract was for a 1-year term and automatically renewed itself each year if the parties did not affirmatively cancel the agreement. On February 1, 1993, the contract automatically renewed for another 12-month period.

Heatcraft canceled the contract on March 1, 1993, and contracted with another organization, KASCO, to sell its products. During the remainder of the 1-year period, KASCO earned $26,124.93 in commissions from the sale of Heatcraft products. Lisbon, on the other hand, was unable to replace the Heatcraft line of products, and total sales decreased as a result.

In April 1993, Lisbon filed suit against Heatcraft for breach of contract. Lisbon alleged Heatcraft breached the contract by canceling it during the 1-year term and claimed $49,999.99 in damages. The final pretrial order was orally amended by the trial court on the day of trial to provide that $26,124.93, the amount paid to KASCO, was Lisbon’s claim for damages.

At trial, Bob Lisbon testified that Lisbon employs seven salespeople, who by contract are paid commissions. For each sale of a Heatcraft product, Heatcraft pays Lisbon a commission, and Lisbon then pays 70% of that commission to the salesperson. Bob Lisbon testified that the arrangement with the salespeople remains in effect and under the terms of the agreement Lisbon is obligated to pay them 70% of any damages awarded in the present litigation. He also testified the salespeople pay their own expenses and the loss of the Heatcraft product line did not decrease their expenses.

The trial court gave the following instruction on damages:

“If you find for the plaintiff, then you should award such sum as you believe will fairly and justly compensate him for the damages you believe he sustained as a direct result of the defendant’s breach of contract.
[376]*376“The plaintiff’s damages may be measured by commissions earned by KASCO for the period February 1,1993, to January 31,1994, decreased by any costs that plaintiff would have incurred on securing the sales.
The total amount of your verdict may not exceed the sum of $26,124.93, the amount of plaintiff’s claim.”

The jury found that Heatcraft breached the contract and awarded Lisbon $26,124.93 in damages. Heatcraft appeals the damage award. Lisbon filed a motion for prejudgment interest on the damage award. The trial court denied the motion, and Lisbon filed a cross-appeal challenging that ruling.

Heatcraft does not appeal on the issue of liability, but only challenges the damages awarded, contending the trial court erred as a matter of law when it allowed Lisbon to recover as damages both lost profits and out-of-pocket expenses incurred in earning those profits.

Simply stated, it is Heatcraft’s position that Lisbon is entitled to recover only its loss of profits which it would have received if Heat-craft had not breached the contract — Lisbon’s actual loss of profits would equal the full amount of the unpaid commissions owed by Heatcraft less the 70% payable to Lisbon’s salespeople and any other expenses Lisbon would have incurred. At the pretrial conference, the court agreed with Heatcraft. However, the issue arose again during the trial, and Lisbon argued that Bob Lisbon could testify as to Lisbon’s contractual obligation to its salespeople, because 70% of any damages awarded would have to be paid to the salespeople under their contract.

In support of its position, Lisbon cited Colorado Interstate Gas Co. v. Dufield, 9 Kan. App. 2d 428, 681 P.2d 25 rev. denied 235 Kan. 1041 (1984), and argued that the real party in interest rule allows Lisbon to recover for the salespeople. The trial court changed its former position, finding Colorado Interstate Gas Co. to be controlling and holding that under the real party in interest rule, Lisbon could properly recover the full amount of the commissions due, including the 70% that would be paid to the salespeople, less any expenses attributable to the securing of these sales.

The opinion in Colorado Interstate Gas Co. recognized the real party in interest rule, stating:

[377]*377“The purpose of the real party in interest rule is to require that the action be brought by the person who, according to the governing substantive law, possesses the right sought to be enforced and not necessarily the person who ultimately benefits from the recovery. The purpose of the rule had been attained if the defendant is not shut out of defenses or counterclaims and will be fully protected by the judgment against further liability on the same cause of action.” 9 Kan. App. 2d 428, Syl. ¶ 6.

In the present case, because Lisbon contracted with Heatcraft, it possessed the right to recover for the breach of the contract. Lisbon is the real party in interest and K.S.A. 60-217(a) mandates the action against Heatcraft be brought in its name. The salespeople, on the other hand, did not contract with Heatcraft and, thus, did not possess a right against Heatcraft. Rather, because the salespeople had a contract with Lisbon to receive 70% of the commission payable by Heatcraft to Lisbon, they possessed a contractual right against Lisbon. In this case, Lisbon will not benefit from the entire judgment, because it is obligated to pay 70% of any recovery to the salespeople.

The real party in interest rule was applied in Ryder v. Farmland Mut Ins. Co., 248 Kan. 352, 367, 807 P.2d 109 (1991), and Winsor v. Powell, 209 Kan. 292, 297, 497 P.2d 292 (1972). In the case before us, because the salespeople were entitled to recover 70% of the commissions paid to Lisbon, the jury properly awarded that amount to Lisbon.

The trial court did not err in accepting Bob Lisbon’s testimony that Lisbon was obligated to pay 70% of any damages awarded to the salespeople. The jury’s award of the total commissions due from Heatcraft places Lisbon in the position it would have occupied if the contract had been performed. Therefore, the damage award was not improper or excessive.

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Cite This Page — Counsel Stack

Bluebook (online)
930 P.2d 1096, 23 Kan. App. 2d 374, 1997 Kan. App. LEXIS 14, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lisbon-v-heatcraft-inc-kanctapp-1997.